The market potential and economic feasibility of a wooden pallet bin leasing system

Abstract

The concept of a bin leasing system represents an effort to use bins more extensively. In a leasing system one inventory of bins would be used by two‘or more annual users. System benefits would be lower per-use costs for the user and the opportunity for the lessor to make a profit.

In order to establish a working data base of information, a mailed questionnaire was sent to 333 fruit and vegetable processors. The response rate on the survey was 45%.

A typical bin is built of hardwood lumber, lasts about seven years, and costs an average of $36.53. Seventy-eight percent of the owners considered bin repair a problem, 85% thought bin transport was expensive, 96.5% agreed that bins were a significant investment. Overall, 66% considered bin leasing a viable option to ownership.

Eastern North Carolina was chosen as the most promising leasing system location. The system will cater to cucumber/pepper processors and sweet potato packers. The method chosen to establish the system is to contract with one or more large companies to supply, on a lease basis, the required replacement bins for future years.

A sample system was designed based on cost and revenue information received from area bin owners. Calculations yielded a net present value of $31,056.99 for a 15 year run of the system when using a discount rate of 12.5%.

The effects of changes in key variables were analyzed. The most dramatic changes in NPV were due to changes in bin life and per-bin revenues.